Continued streamlining yields results

Second quarter April–June	Interim period January–June
Order intake amounted to MSEK 20.5 (39.8) Net sales amounted to MSEK 44.7 (42.4) Gross margin amounted to 70 (64) percent EBITDA amounted to MSEK 4.8 (4.2) Earnings per share amounted to SEK 0.00 (-0.01)	Order intake amounted to MSEK 51.9 (82.5) Net sales amounted to MSEK 83.0 (74.0) Gross margin amounted to 70 (67) percent EBITDA amounted to MSEK 7.1 (6.4) Earnings per share amounted to SEK -0.07 (-0.04)

Financial overview

	Apr–June 2023	Apr–June 2022	Jan–June 2023	Jan–June 2022	Full year 2022
Order intake, MSEK	20.5	39.8	51.9	82.5	189.0
Order backlog, MSEK	52.2	82.7	52.2	82.7	81.9
Net sales, MSEK	44.7	42.4	83.0	74.0	171.1
Capitalized development costs	2.1	2.6	3.8	5.4	9.1
Gross margin, %(1)	70	64	70	67	67
EBITDA, MSEK	4.8	4.2	7.1	6.4	28.4
EBITDA margin, %	10.3	9.3	8.2	8.1	15.8
Operating profit (EBIT), MSEK	0.3	-0.5	-4.3	-3.6	9.1
Adjusted operating profit (EBIT)(2), MSEK	0.3	-0.5	-2.0	-3.6	9.1
Profit after tax, MSEK	0.1	-0.6	-5.9	-3.9	8.6
Adjusted profit after tax(3), MSEK	0.1	-0.6	-2.2	-3.9	8.6
Cash flow from operating activities, MSEK	-6.8	10.5	-10.8	14.0	32.2
Solidity, %	65	55	65	55	63
Average number of employees	68	75	67	75	72
Earnings per share	0.00	-0.01	-0.07	-0.04	0.10

⁽¹⁾    The definition of gross margin has changed since last year and is calculated as Net sales minus raw materials and consumables in relation to Net sales.

⁽²⁾    The operating profit (EBIT) is affected by a one-off cost of MSEK 2.3 during the period January–June 2023.

⁽³⁾    The profit after tax is affected by one-off costs of MSEK 3.7 during January–June, of which the operating profit is affected by MSEK 2.3 and net financial items by MSEK 1.4.

A WORD FROM THE CEO

Johan Friberg, CEO and President

The second quarter developed in the same direction as the first quarter. The sawmill industry’s market situation remains challenging, which is unfortunately reflected in a halving of RemaSawco’s order intake. At the same time, our streamlining initiatives and product development projects are progressing according to plan, which positively impacts the Group’s EBITDA.

The Group’s net sales for the first half of the year show growth of approximately 12 percent compared to the previous year, and we report an improvement in the EBITDA of approximately 10 percent.

Challenging for the sawmill industry

The sawmill industry is experiencing a global economic downturn, with lower supply and higher prices for raw materials. This, together with falling demand for sawn wood products, is having a negative impact on our customers’ profitability. Therefore, making optimal use of raw materials and streamlining their operations is becoming increasingly important for our customers. This is precisely RemaSawco’s mission – to enable its customers to optimize and streamline their operations with smart data analysis.

The sawmill industry is a sector of the future and one of the cornerstones of the green transition, where wooden construction is crucial. Investments are therefore necessary

for our customer’s positioning in this market. The timing and pace of the necessary investments are currently difficult to assess but are significant for both RemaSawco and our customers’ growth and profitability.

Motion Analysis grows profitably

Although the second quarter showed a weaker order intake compared to the previous year, the market situation looks very promising for the Motion Analysis business unit. Developments at the beginning of the third quarter confirm this. We note a growth of 25 percent during the second quarter compared to the previous year and 33 percent for the half year. The business unit maintains good margins while sharply increasing investments in new products.

Group well equipped

We are facing a period of uncertainty about when and at what pace the economy will turn around in the sawmill industry.

I am convinced that we have the right focus in terms of what we can influence, such as the development of new products to offer our customers. We have also developed our organization to better cope with challenging market conditions.

THE GROUP’S DEVELOPMENT IN THE SECOND QUARTER

Order intake, net sales, and profit

Order intake amounted to MSEK 20.5 (39.8). Order backlog as of June 30, 2023, amounted to MSEK 52.2 (82.7).

Net sales amounted to MSEK 44.7 (42.4). Capitalized development costs amounted to MSEK 2.1 (2.6) and relate to both business units.

Gross margin amounted to 70 (64) percent.

EBITDA amounted to MSEK 4.8 (4.2). Other external charges increased compared with the corresponding period last year, which mainly is attributable to the Group’s increased pace of product development.

Depreciation/amortization amounted to MSEK -4.5 (-4.7). The decrease in depreciation/amortization is mainly due to the fact that trademarks and customer relations concerning the Motion Analysis business unit were fully depreciated/amortized in the previous year. Net financial items amounted to MSEK -0.4 (-0.3).

Result after taxes amounted to MSEK 0.1 (-0.6).

Financial position, investments, and cash flow

The Group’s investments in non-current assets during the quarter amounted to MSEK 2.2 (2.8) of which MSEK 2.1 (2.6) is related to capitalized development projects. Capitalization of development projects takes place in both business units.

The operational cash flow during the quarter amounted to MSEK -9.0 (6.8). Solidity as of June 30, 2023, amounted to 65 (55) percent. Net indebtedness amounted to 0.1 (0.1) times.

Available liquid funds including the undrawn part of the overdraft facilities amounted to MSEK 19.0 (27.7) as of June 30, 2023.

THE GROUP’S DEVELOPMENT DURING THE INTERIM PERIOD

Order intake amounted to MSEK 51.9 (82.5). Order backlog as of June 30, 2023, amounted to MSEK 52.2 (82.7).

Net sales amounted to MSEK 83.0 (74.0) and capitalized development expenses amounted to MSEK 3.8 (5.4). Capitalization of development projects takes place in both business units.

Gross margin amounted to 70 (67) percent.

EBITDA amounted to MSEK 7.1 (6.4). Depreciation/amortization amounted to MSEK -11.4 (-10.0), of which MSEK -2.3 (-) is attributable to a write-down in connection with the termination of a rental contract for office and production premises in Finland. The termination was carried out in order to reduce rental costs in the RemaSawco business unit when parts of the operation are centralized to the head office in Linköping, Sweden.

Net financial items amounted to MSEK -1.9 (-0.6). The change in net financial items is linked to a one-off item of MSEK -1.4 (-) for a write-down of a receivable from Digital Vision relating to the purchase price established when the business unit was divested in 2014.

Result after taxes amounted to MSEK -5.9 (-3.9).

ROLLING 12-MONTH ORDER INTAKE, REVENUE AND EBITDA

MSEK

EBITDA, %

Revenue, MSEK

Order intake, MSEK

The Group has a rolling 12-month EBITDA margin of approximately 15 percent, which is the Group’s long-term performance target. In order to maintain and then increase this level, especially sales growth is required.

BUSINESS UNIT:REMASAWCO

RemaSawco provides solutions to optimize production in the sawmill industry. The product portfolio includes proprietary software that, with the help of laser, 3D scanning, X-ray, and automation, measures and analyzes timber and boards throughout the sawmill process to maximize value exchange, minimize waste, and thus increase customer profitability.

Performance in the first half of the year

Net sales for the second quarter are in line with the previous year, while we slightly improve the operating profit before depreciation/amortization. The first half of the year has been characterized by a challenging market situation where demand for sawn wood products has been low and raw material prices have been high. As a consequence, many of our customers are reducing their production rates. 

Due to the weak development in the construction industry and the general economic situation, many of our customers have been reluctant to make new investments, resulting in a significantly lower order intake in the first half of the year compared with the previous year. We expect demand to gradually recover as investments are necessary for long-term profitability. We note that our customers in the Nordic region intend to implement several upgrade projects, and we see a strong interest in RemaSawco’s expanded and improved service offerings. We are facing a period of uncertainty about when and at what pace the economy will turn around.

	Apr–June 2023	Apr–June 2022	Jan–June 2023	Jan–June 2022	Full year 2022
Order intake, MSEK	15.1	32.7	36.0	67.1	151.8
Net sales, MSEK	34.0	33.9	64.0	59.8	137.7
Capitalized development costs	0.9	1.1	1.7	2.3	4.2
EBITDA, MSEK	3.0	2.1	4.7	3.0	17.8
EBIDTA margin, %	8.6	6.0	7.2	4.8	12.5

Product development

Basic development continued during the quarter in three main areas: harmonization of functionality, user interface, and product upgrades. We have developed new products in X-ray inspection and digital applications that have undergone qualification. The business unit maintains a high rate of investment in product development with the aim of creating scalability and developing key capabilities for the digitalization and optimization of sawmills and their processes.

BUSINESS UNIT:MOTION ANALYSIS

Motion Analysis Systems offers its customers software for the analysis of high-speed film, a niche where the Company is world leading. The software is sold under the product names TEMA and TrackEye^Ⓡ, where TEMA has most of its customers in the civil sector and TrackEye^Ⓡ within defense-related testing and the aerospace industry.

Performance in the first half of the year

Market development remains good in the business unit. A slightly weaker order intake compared to the previous year was seen in the second quarter, due to a weaker order intake in the European market. The Asian and American markets account for the bulk of the quarter’s order intake.

Net sales for the half year are more than 30 percent higher than the previous year, confirming the positive market development. Noteworthy deliveries during the quarter include a Digital Image Correlation (DIC) system to Israel and a number of major TrackEye^Ⓡ licenses for various test sites in the defense sector.

	Apr–June 2023	Apr–June 2022	Jan–June 2023	Jan–June 2022	Full year 2022
Order intake, MSEK	5.4	7.1	15.9	15.4	37.2
Net sales, MSEK	10.7	8.5	19.0	14.2	33.4
Capitalized development costs	1.2	1.5	2.1	3.1	4.9
EBITDA, MSEK	3.9	3.5	5.5	5.5	15.2
EBIDTA margin, %	32.8	35.0	26.1	31.8	39.7

Product development

During the quarter, the business unit continued the work of productizing the new platform focusing on a number of specific applications. Several customizations have been implemented, which will be integrated into the standard software in the future.

OTHER INFORMATION

Parent Company

The Parent Company’s net sales for the second quarter amounted to MSEK 1.0 (1.0). Operating profit amounted to MSEK -2.1 (-1.4). Result after taxes amounted to MSEK -2.1 (1.3). Investments in fixed assets amounted to MSEK 0.0 (0.0). The Parent Company’s available liquid funds, as of June 30, 2023, amounted to MSEK 0.0 (0.0). The Parent Company’s equity as of June 30, 2023, amounted to MSEK 101.2 (137.6) and the solidity was 99 (92) percent.

Update of the Group’s brand

We have updated the Group’s logo to distinguish it from the subsidiary Image Systems Motion Analysis. The logo, which combines the Group’s colors in the shape of a camera shutter, symbolizes our expertise in advanced image processing and analysis.

Significant events after the period

The Motion Analysis business unit receives a 7-year framework agreement from the French Ministry of Defense with a maximum value of approximately MSEK 32 and a TrackEye^Ⓡ order of around MSEK 1.1 for a test site in Italy.

Personnel

The average number of employees was 68 (75). The number of employees at the end of the period was 69.

Number of shares

The number of shares on June 30, 2023, amounted to 89,207,818.

Accounting policies

Image Systems applies the International Financial Reporting Standards (IFRS) as adopted by the EU. The interim report for the Image Systems Group is prepared in accordance with IAS 34, Interim Financial Reporting, and the Swedish Annual Accounts Act. Disclosure in accordance with IAS 34, Interim Financial Reporting, is provided in notes as well as elsewhere in the interim report.

The interim report for the Parent Company, Image Systems AB, is prepared in accordance with the Swedish Annual Accounts Act as well as the Swedish Financial Reporting Board’s recommendations RFR 2 Accounting for Legal Entities.

Image Systems applies the ESMA (European Securities and Markets Authority) Guidelines on Alternative Performance Measures. Definitions of indicators are provided on page 15 and relevant reconciliations on page 14.

Risks and uncertainties

The Group’s significant risks and uncertainties include business risks related to agreements with customers and suppliers as well as other external factors such as currency fluctuations. The Group’s significant financial and business-related risks are discussed at depth in the management report and under Note 3 in the 2022 Annual Report. No significant new or changed risks or uncertainties have been identified during the quarter.

Audit

This interim report has not been reviewed by the Company’s auditors

Financial calendar

Interim report July–September 2023       November 10, 2023

Year-end report 2023                     February 9, 2024

Long-term financial objectives

Image Systems aims to create long-term value growth for its shareholders. To achieve this, the Board of Directors has set long-term financial objectives:

EBITDA >15%

Solidity >50%

Dividend              20% of the profit after taxes

The Board of Directors and the Chief Executive Officer confirm that the interim report provides a true and fair overview of the Parent Company’s and the Group’s operations, financial position, and performance and describes the material risks and uncertainties facing the Parent Company and the companies included in the Group.

Linköping, Sweden, August 23, 2023

Anders Fransson              Jörgen Hermansson       Catharina Lagerstam

Chairman of the Board  Director                               Director

Jan Molin                             Matilda Wernhoff             Annika Ölme

Director                               Director                               Director

Johan Friberg

Chief Executive Officer

The information in this report is disclosed pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 8:00 AM on August 23, 2023.

Financial reports are available on the Company’s website
http://www.imagesystemsgroup.se

Questions will be answered by:

Johan Friberg, CEO and President, telephone +46(0)13-200 100,
e-mail johan.friberg@imagesystems.se

Image Systems AB, Snickaregatan 40, 582 26 Linköping, Sweden. Corporate registration number 556319-4041

This disclosure contains information that Image Systems AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 23-08-2023 08:00 CET.